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Performance-related pay and gender wage differences

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  • Kangasniemi, Mari
  • Kauhanen, Antti

Abstract

We study the impact of performance-related pay (PRP) on gender wage differences using Finnish linked employer-employee panel data. Controlling for unobserved person and firm effects, we find that bonuses increase womens earnings slightly less than mens, but the economic significance of the difference is negligible. Piece rates and reward rates, however, tend to increase gender wage differentials. Thus, the nature of a performance related pay plan is important for gauging the impact of PRP on gender wage differentials. A comparison with OLS results shows the importance of controlling for unobserved person and firm effects.

Suggested Citation

  • Kangasniemi, Mari & Kauhanen, Antti, 2011. "Performance-related pay and gender wage differences," Discussion Papers 1249, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1249
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    References listed on IDEAS

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    1. Wolf, Elke & Heinze, Anja, 2007. "How to Limit Discrimination? Analyzing the Effects of Innovative Workplace Practices on Intra-Firm Gender Wage Gaps Using Linked Employer-Employee Data," ZEW Discussion Papers 07-077, ZEW - Leibniz Centre for European Economic Research.
    2. Daniel Parent, 2001. "Incentive Pay in the United States: Its Determinants and Its Effects," CIRANO Working Papers 2001s-04, CIRANO.
    3. de la Rica, Sara & Dolado, Juan J. & Vegas, Raquel, 2010. "Performance Pay and the Gender Wage Gap: Evidence from Spain," IZA Discussion Papers 5032, Institute of Labor Economics (IZA).
    4. Amuedo-Dorantes Catalina & De la Rica Sara, 2006. "The Role of Segregation and Pay Structure on the Gender Wage Gap: Evidence from Matched Employer-Employee Data for Spain," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-34, April.
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    Cited by:

    1. Maria Rouziou, 2019. "The contingent value of pay inequalities in sales organizations: integrating literatures in economics, management, and psychology," AMS Review, Springer;Academy of Marketing Science, vol. 9(3), pages 184-204, December.
    2. Kato, Takao & Kodama, Naomi, 2017. "Women in the Workplace and Management Practices: Theory and Evidence," IZA Discussion Papers 10788, Institute of Labor Economics (IZA).
    3. Katarzyna Bech & Joanna Tyrowicz, 2017. "Estimating gender wage gap in the presence of efficiency wages -- evidence from European data," GRAPE Working Papers 20, GRAPE Group for Research in Applied Economics.

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    More about this item

    Keywords

    gender wage differences; performance-related pay; person and firm effects; panel data;
    All these keywords.

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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